Appraisal News and Business Tips

Posts Tagged Fannie

The Power of Social Media and Appraisers

A few months ago, an AMC sent out an email to all their appraisers saying it was requiring that they include a copy of their work file with the appraisal.
Within a very short period of time after it was sent, I saw the email posted to a Facebook group. There were 356 comments posted. It soon “went viral” spreading all over the Internet. The AMC backed down.
Within the past week, another AMC sent a very rude email response to an appraiser who declined applying for a staff position at the AMC. I saw it posted on a Facebook group. It also went somewhat viral, although not as widely distributed as the workfile email.
Read more, including the original email, in the very interesting Jonathon Miller’s Housing Notes – August 21 edition.
Click here – it is near the bottom of the page.
What does this mean? In the pre-Internet days, often it would take weeks, or months, for appraisers to find out about FHA and Fannie changes, for example. Now it is available within a few minutes.
What’s the downside for appraisers? Even if you post to a group that requires approval, your postings can be obtained by others. Group members can send them to anyone. This is a definite problem if do court testimony. A while ago an attorney asked me how many appraisals I had done in the past 6 months as I had a broken ankle. How did she know about my ankle? She did not subscribe to the email-only discussion group. She asked another appraiser to check online for anything that might help her case. Other appraisers have reported similar situations.
Remember the Primary Rule, which I learned when I first browser opened the Internet to us all. At that time you assumed it could be published on the front page of the New York Times, Wall Street Journal, etc. Now, it is even worse – it can go all over the Internet. The only communication that I know of that is private is the inside of postal mail envelopes. Government agencies can track what is on the outside, but not the inside without a special court order.

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Facing AMC License Denial, Coester Sues Virginia Board

 

Facing AMC License Denial, Coester Sues Virginia Board
by Isaac Peck, Editor, WorkingRE
Excerpt:
Facing denial of its license to operate an appraisal management company (AMC) in the state of Virginia, the AMC Coester VMS has filed a lawsuit against the Virginia Real Estate Appraiser Board alleging that the Board is engaged in “a conspiracy to restrain and monopolize trade” and is operating in violation of federal antitrust laws.
The suit follows Virginia’s recently passed AMC licensing laws, which set an August 18 deadline for applicants to obtain AMC licensure or cease operations in the state. The Board has issued dozens of AMC licenses but selected Coester for closer examination. On July 15, Coester attended an informal fact-finding conference and addressed several of the Board’s concerns, including Coester’s history of consent orders and settlement agreements in five other states, for alleged violations of state laws: Maryland, North Carolina, Tennessee, Louisiana, and Minnesota. The allegations against Coester in these states include: unlicensed AMC activity, false advertising, failure to pay appraisers on time, failure to pay customary and reasonable fees, failure to respond to requests within the time period specified, failure to submit biannual certification, as well as USPAP violations committed by Brian Coester himself.
Read lots more, and get links to the docouments at:
For lots more info on Coester, just google Coester AMC or brian coester appraiser
My comment: Looks like various state appraisal boards are looking closer at AMCs. Coester recently got into a tiff with the Louisiana State Board, which was resolved. I am so glad California has never had an appraisal board!! (Gov.  Schwartzenegger wanted to cut costs back then.) Too many possible conflicts of interest… The issues seems to be mostly about fees. I am also not comfortable about appraisal state boards regulating appraisal fees. They should focus on what is important – USPAP.

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Are you or your firm planning on any hiring trainees within the next 5 years?

Are you or your firm planning on any hiring trainees within the next 5 years?

 

My comment: I wonder what the response would be if lenders allowed trainees to sign on their own… remember the mortgage broker days? I sure wish there was a survey on trainee commercial appraisers as I see lots of them where I am. I am hearing that it is back to the “old days” when fee appraisers only hired relatives (because most appraisers were staff appraisers at lenders).

 

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AMC/lender now accepts trainees signing on appraisal reports

Be sure to check your state’s requirements, as they vary widely among the states.

This is the first one I know of. Maybe they have been reading my free emails where I suggest this is the only solution to the appraiser shortage, now and in the future, that can start immediately. FYI, Red Sky is owned/affilated with U.S. Bank

Excerpts from an email (Appraiser Partner News) sent to appraisers on its panel June 11, 2015

======================================

Supervisory Appraiser Change

Upon review, Red Sky Risk Services, LLC has refined its expectations regarding the involvement of appraiser trainees. Important to note, the following change DOES NOT override specific state statute(s) or appraiser training requirements.

Effective immediately, Red Sky is no longer requiring supervisory appraisers to be physically present with trainee appraisers at all subject property inspections and driving comparable sales.

My comment: There is a short additional list of specific requirements. But, they are nothing new – Supervisor to review report, responsible for report, etc.

 

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Appraiser shortage – for AMCs (Appraisal Management Companies), not other clients

Appraiser shortage – for AMCs, not other clients

There is a significant shortage of appraisers willing to work for AMCs with low fees and escalating Scope Creep.

AMCs whose business model is based on low fees to appraisers are having difficulty finding anyone willing to accept their appraisals. They keep calling and calling trying to find someone to work for their low fees.

Direct lenders or the few “good” AMCs are not experiencing an appraiser shortage. Appraisers who work for them turn down AMC work.

 

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Comp Photos and MLS, Fannie, USPAP, etc.

Appraisalport polls on comp photos

By Steve Costello, www.appraisalport.com

This month I want to discuss three recent polls dealing with comp photos. In the first poll, we asked “With the availability of MLS photos, do you still feel it is necessary to drive by and photograph every comp?” We had a total of 3819 responses and the top two answers were very close. The winner, with 40 percent of the vote, was “Sometimes, it depends on the complexity of the specific assignment.” Coming in a close second was “Yes, I always want to see any property I use in a report” with 38 percent of the vote. The final answer of “No, I would rather just use MLS photos” only scored about half the votes as the first two answers, finishing with 22 percent. This makes sense because I think most appraisers want to look at a comp before they include it in a report, especially if they aren’t already familiar with the property. I can also see where some appraisers are very familiar with the properties in their area, use many of the same comps over and over again, and don’t feel a need to drive by and photograph them every time they use them.

In the next poll, we asked “In your opinion, with MLS, Google, and other photo sources available to clients, the main reason original comp photos are required from the appraiser is:” This poll had 3986 responses and had a pretty clear winner. A full 63 percent of the appraisers chose the answer “To make sure the appraiser actually drives by the comps.” So it looks like most appraisers don’t think their clients care as much about the actual photo compared to just making sure the appraiser actually visited the comp. The answer we expected to be very popular, “To provide the client with up-to-date photos of the comps – ensuring they exist in the stated condition,” only received 22 percent of the vote. A third response of “So the clients won’t have to take the time to look up the photos from one of the sources noted above” didn’t do well, only pulling in 3 percent of the vote. Not a surprise — we didn’t really expect many appraisers to choose that answer. Finally, 13 percent of appraisers went with “Other reason” as the best choice for this question. We really don’t know if there were one or many “other reasons” or what they are.

Finally, we asked “Would you be in favor of eliminating the requirement to include an original photo of every comp as long as a recent MLS photo of the property could be included with your report?” This question was very popular with 4770 total votes. It also produced a landslide vote with 79 percent of the appraisers selecting the answer “Yes.” Only 15 percent answered “No” and would not want to use an MLS photo instead of an original if it were available. A final 6 percent were “Not sure” how they felt about this issue. So, from this poll it is clear that appraisers feel that an original photo is not a necessity to produce a quality appraisal as long as a good representative photo is available from another source like an MLS.

My comment: As we all know, a photo taken at the time of listing from the MLS is often better than one taken later and USPAP does not  require comp photos. Fannie Mae certifications require that the appraiser inspect the exterior of the comp, not take a photo. What about re-using a comp photo? Why the requirement of an “original” photo? To be sure appraisers drive by the comps.

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It’s Not a Comp, It’s a Sale – Lies, Damn Lies…and FNMA 'statistics'

Another “good one” by Dave Towne, Washington appraiser and commentator

Something’s been gnawing at my craw ever since January when FNMA’s wonderful CU was unleased to the world.  And before that, which still continues, is the AQM process they still use to judge the work of appraisers.

No one else has written about this, or even mentioned it, so I will: It has to do with the word “Comp” which is used liberally by FNMA.

What exactly is a “Comp?”

In FNMA’s world, it’s any property that they obtain, either by their vast AVM process which examines millions of property transactions, or properties that have been extracted from appraisal reports submitted by appraisers……..yes, your work.  In their fuzzy logic, it’s a “Comp” considered for your report if they say it is.  It is not!

A true “Comp” is a property viewed and/or analyzed by a real living, breathing, mirror fogging appraiser who compares that sold property against the subject property in terms of multiple features, characteristics and amenities.  It is not determined by an AVM or algorithm within the vast bowels of FNMA.  Until the property has such analysis done by an appraiser, it is merely a SALE……it is not a “Comp.”

This FNMA lie really became evident to me on 4/20/15 when FNMA released a news release about how CU has been integrated into their on-line Desktop Underwriter software mortgage lenders use, which you can read here:  http://www.fanniemae.com/portal/about-us/media/corporate-news/2015/6239.html?p=Media&s=News+Releases&from=RSS

Within that news release is this quotation from a VP at a mortgage lender:  “The collateral information that CU provides is invaluable and simply staggering,” said Breck Tyler, Executive Vice President, Trustmark Mortgage Services. “CU has aided in providing important comparable data that was previously unavailable or very difficult to get. CU messages in DU will help streamline appraisal review and make the underwriting of an appraisal a much more informed process.”

Then, FNMA released info directed to Correspondent Lenders who intend to use the CU process in UCDP, but don’t intend to sell the loan to FNMA:  https://www.fanniemae.com/content/fact_sheet/collateral-underwriter-non-seller-implementation-guide.pdf

That has this statement:  “Fannie Mae does not instruct or suggest to lenders that they ask appraisers to address all or any of the up to 20 comparables that are provided by CU for most appraisals.”

I want to repeat what I said above…in case you missed the point:  A PROPERTY IS NOT A “COMP” UNLESS YOU DETERMINE IT IS AND INCLUDE IT IN AN APPRAISAL REPORT.  Otherwise it’s just a ‘sale.’

If you’re an appraiser who liberally uses the word “Comp” in place of a ‘property sale’ I would ask that you be more careful.  If you receive info from a lender, AMC or anyone else who asks you to look at the “Comp” they have provided, correct them and use the words “sale property” until you have determined that it truly is a “Comp.”

I’m also asking members of appraisal organizations and associations to communicate your concern about this lie perpetrated by FNMA directly with them, and ask FNMA to change the word “Comp” used in their CU Reports, news releases, instructional materials, etc. to ‘Property Sales’ so that there is no misunderstanding about the significance of this issue.

If organizations and associations won’t do that on behalf of appraisers, then we might as well kiss the profession of residential real property appraising goodbye. Because if a list of ‘sales’ are considered “Comps” then an actual human appraiser won’t be needed to provide supportable property analysis and market value reports.

Dave Towne
dtowne@towneappraisals.com

www.towneappraisals.com
Mount Vernon, WA

My comment: I have been aware of the difference between a sale and a “comp” for a very long time. I try not to mix them up. It is very important when communicating with lenders and real estate agents, who should already know the difference. I am glad that Dave Towne points out this very big difference.

I have not found it to be an issue with non-lender clients, where I use “comparable sales” which is a much clearer term to use, since few are familiar with the term “comp”.

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Why have AMCs changed so much since HVCC?

AMCs have been around for a long time. The first AMC, LSI, started in the 1960s. Before HVCC, their market share was an estimated 10-15% of lender residential appraisals. There were relatively few AMCs. Now, there are an estimated over 400-500 AMCs.

I have been writing about AMCs in my paid Appraisal Today newsletter since soon after my first issue in June 1992. In the mid-1990s, when lender business crashed in many areas, some appraisers signed up for AMCs to get work. In those pre-Internet days, often specific forms software and transmission methods were required. Fees were lower than for direct lender work but were stable. There were no broadcast orders, shopping for low fees, or Scope Creep. When business picked up, few appraisers continued to work for them. In my area, there were a few larger appraisal companies who did all the work for specific AMCs.

Then HVCC came and most lenders shifted to AMCs to handle their appraisals. Now AMC market share is estimated at over 80%. Fees varied widely. Residential appraisal fees became sensitive to supply and demand. When business was slow, fees went down. When demand for appraisals is high, such as now, fees went up as many appraisers would not work for low fees. Many appraisers, like other business persons, were afraid to turn down work, even with low fees.

Lenders have always wanted fast turn times, to be more competitive and close their loans. Thus, AMCs push for faster turn times.

When working for direct lenders (and mortgage brokers prior to HVCC) appraisers could establish a reputation for accurate and good quality appraisals with their clients. This is still true today with those clients. However, this is not possible with AMCs who have multiple lender clients and ordering that is not done locally and is done by clerks not appraisers.

The greatest change is in the increasing Scope Creep, which has resulted in longer and longer appraisal reports and replying to many questions about appraisals. Unfortunately, much of the additional information does not affect value or make the appraisals more reliable.

Another significant factor is the widespread use of automated review software, including CU, which means that fewer and fewer licensed appraisers are used for reviews.

Even if you don’t work for AMCs, direct lenders are more “picky” but nothing like AMC requirements. Probably because they only manage appraisals for that lender.

Why has this happened? AMCs work for lenders. Lenders tell the AMCs what they want. I suspect that AMCs with multiple clients combine requests from different lenders into one very long engagement letter/list of requirements.

Everyone I have spoken with, from the lender side, says the recent mortgage crash caused lenders to be more concerned about residential appraisals. The previous crash in the late 1980s, the S&L failures, was caused by commercial property loans. There were some changes made to commercial appraisal requirements, but were minor compared with the changes in residential appraisal requirements post-HVCC.

Mortgage lending is a boom and bust business, starting with Fannie and Freddie in the 1970s. They purchased loans from lenders and made refinancing much easier. When interest rates are low, there are lots of loans. When rates are up, loans decline.

Mortgage lending is also boom and bust regarding risk of defaults. Prior to 2008, since the Great Depression, there had never been property value declines that affected the entire country. Statisticians working for lenders, investors, etc. only looked at their data from the past and did not worry about a national meltdown. So, none predicted it. This is, of course, the minus of using statistical data from the past.

What will happen in the future? We will return to the “typical” days of getting mortgage loans with loosened credit requirements. More and more homeowners will not be “underwater” and will be able to refinance. Will residential appraisal “requirements” loosen? No one knows as we have never had so many requirements that keep increasing. Lenders control the requirements. Until they decide that they are causing too many appraisers to quit, want to speed up their loan approval processes, etc. nothing will change. Residential AMC appraisal fees will continue to be cyclical, depending on supply and demand, similar to commercial appraisal fees as long as AMCs are managing appraisals. The less AMCs pay to appraisers, the higher their profits. Maybe lenders will step in and tell AMCs what they must pay their appraisers.

What about direct lenders? There is some scope creep, but not much as compared with AMCs. They don’t shop for the lowest fee. My advice to appraisers is to work for direct lenders whenever possible. Many appraisers with over 20 years of experience still get most of their work from them. When business is slow, they accept AMC work. Another option is to work for AMCs that work for one, or a few, lenders. Then the requirements will not be from a lot of different lenders.

NOW IS THE VERY BEST TIME TO LOOK FOR NEW NON-AMC CLIENTS. WHEN EVERYONE IS BUSY AND TURNING DOWN WORK!! I HAVE SPECIAL REPORTS, LOTS OF MARKETING TIPS FOR NON-AMC LENDER WORK AND ARTICLES ON NON-LENDER WORK IN MY PAID APPRAISAL TODAY NEWSLETTER. www.appaisaltoday.com

 

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Newz Flash: Fannie Mae’s Collateral Underwriter Hacked!!!

A disgruntled man who lost his home to foreclosure did it!! The CU system is completely shut down. No details were available on when, or if, it will be fixed. The un-named man was not available for comment as he is reportedly hiding out in a remote cabin in the woods in a very rural upper Michigan or Canadian location.

He, his wife, and 4 children are now living in a Tiny House on his brother in law’s rural property in Michigan. They lost their suburban 4 bedroom home they had owned for over 20 years to foreclosure. The family has an outhouse, a hand pumped well and wood heat. A small solar power array is used for a computer and Internet connection with a few hours of electricity daily.

Who is in an uproar about this? 

– Not appraisers who don’t like a system that evaluates their appraisals but they don’t know the criteria.
– Not underwriters who are required to learn a new system and do manual reviews of appraisals before sending warnings to appraisers.
– Not loan officers whose deals are taking longer to close. Not borrowers who have to wait longer to get their loans approved.
– Not law enforcement, who don’t think he is a terrorist or a nut holed up with a lot of guns.

FYI, it is April 1 today. You know what that means ;>

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Statistics and Appraisal Data

The key to any statistical analysis is DATA, DATA, DATA!!

Single family real estate data is not very reliable or consistent, and not enough is available in many areas, as we all know.

CU is the most significant attempt to get more useful data by requiring appraisers do use specific coding and criteria. However, real estate is local, local, local. Even the number of bedrooms varies a lot as there are different criteria for determining what is a bedroom, even in the same city. Three appraisers measuring the same house will probably not have the same square footage, as I learned doing relocation appraisals.

With CU, this is becoming more obvious as there are sometimes wide variations in how appraisers code factors. For example, why do condition ratings vary? How accurate is MLS? Is public records accurate? What is the best source?

Now that regression software is popular with appraisers for getting adjustments, I have been thinking about why it is often not very reliable. To understand even simple regression requires knowledge.

My first statistics class was in 1963. The first time I used multiple regression was in graduate business school in 1979, when I did a mini-thesis on factors in REIT stock volatility using SPSS.I used a remote university mainframe that kept blowing up and erasing my data. There were no data issues. Doing multiple regression analysis on real estate housing data was not possible. Way too much lack of usable data.

Since I started my Appraisal Today newsletter in 1992, I have been writing about AVMs. The less data that is available, the less reliable the value.

As we all know, AVMs work well in a conforming home in a large tract of similar homes, built in the past 10 years. After that, the accuracy and reliability goes down fast. Just check what Zillow’s Zestimate against your appraised value.

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